By the end of 2018, it was easy to see storms on the horizon in terms of the domestic and global economic outlook. The U.S. housing market was expected by many to reprise its role as the canary in the coal mine, with price growth beginning to slow and construction activity continuing to underwhelm.

At the midpoint of 2019, however, we’ve already seen several surprises in the housing market, many of them on the positive side. Among the biggest of all have been mortgage rates. Even as the average APR on the 30-year fixed-rate mortgage began to retreat from almost 5 percent in November 2018, most forecasts from housing market experts predicted rates would break that barrier in 2019 thanks to an ongoing economic expansion. While modest growth expectations came true by most accounts, few could have guessed that mortgage rates would fall to within two-year lows by mid-year.

“I feel very good about the housing market,” said Lawrence Yun, chief economist at the National Association of Realtors, in a Wall Street Journal report on falling mortgage rates and increased home loan application activity. “Inevitably, I believe that home sales, which have been down year-over-year for many consecutive months, will turn positive in the second half of this year.”

Still, home sales haven’t taken off in response to lower rates, at least not yet. As of April, existing-home sales as reported by NAR clocked year-over-year declines every month for 14 months straight. Some economists speculate that the recent flood of mortgage applications could be causing a backlog that is delaying closings, although home sales are notoriously slow to respond to economic trends. The latest market forecast from Freddie Mac has home sales picking up steam through the rest of the year and then leveling off in 2020. Meanwhile, another report from realtor.com Senior Economist Joe Kirchner doesn’t anticipate existing-home sales returning to 2017’s blockbuster levels until 2023.

Buyers vs. sellers

One prediction from last year that has mostly held true: More markets around the U.S. are finally seeing prices level off and supply increase enough to benefit buyers.

Notably, Chicago has become recognized as being among the biggest buyer’s markets in the country. The median home price in the Chicago metro area remains dead-even compared to the same time last year, while the months of available supply is just shy of six, which is what is generally considered a sign of a balanced market. Unfortunately for sellers and listing agents, sales volume has declined 7 percent in the last year, and recent growth in active listings has brought more competition.

While a lack of price growth is hardly welcome on the other side of the transaction, at least Chicago homeowners aren’t alone in seeing lower returns. Freddie Mac forecasts U.S. home price appreciation to average 3.6 percent in 2019, compared to 4.8 percent last year and 7.2 percent in 2017.

Economic growth

While mortgage rates and prices all influence housing market activity, the decision to buy or sell a home will always depend on future expectations among consumers. Those predictions are often shaped by the headline figures everyone pays attention to: gross domestic product, unemployment and wages.

Historically speaking, all of those measures look strong heading into the second half of 2019. But the fear among experts and novices alike is that these represent the peak of the current economic cycle, and that fear alone may determine the performance of the housing market by dampening economic confidence.

“With the boost from fiscal stimulus and a strong job market, the U.S. was able to reach and exceed 3 percent growth in a number of quarters in 2017 and 2018, but as those effects wane, we do not expect to reach those levels of growth again this year,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association, in a recent statement. “We expect growth to slow from 3 percent in 2018 to a little over 2 percent in 2019, as global growth slows.”